An extension of Sports Business News, the largest online sports business news service -- featuring the comments and insights of SBN Publisher Howard Bloom

Wednesday, November 21, 2012

College football – a very big business

Sunday
evening CBS’ “60 Minutes” offered an inside look at the big business of
college sports, focusing on the University of Michigan and how
important the Spartans football program
is to the University. The same day The Baltimore Sun and ESPN reported
the University of Maryland and Rutgers were ready to move to the Big
Ten, both moves business and financially related.

Monday Maryland announced their move to the Big Ten, Tuesday the Big
Ten became the Big 14 when Rutgers said they would be leaving the Big
East for the Big Ten. Maryland and Rutgers left their respective
conferences to join the Big Ten for one reason and one reason alone –
the big business college athletics have become.

Insider Higher Education offered some of the numbers associated with
Maryland’s move from the Atlantic Coast Conference (ACC) to the Big Ten.
Maryland will pay the ACC $50 million for the right to leave the
conference after the 2013-14 academic/athletic calendar (Rutgers
reportedly will attempt to pay a $10 million to $20 million exit fee to
the Big East next year). Currently Maryland receives $17 million from
the ACC annually. Big Ten schools
currently each receive an annual payout of $24.6 million. According to
the Insider Higher Education Maryland’s athletic department is losing
$5 million annually.

Losing more than $5 million annually, Maryland’s athletic department
cut 27 varsity sports teams in an attempt to help defray their
multi-million deficit in June.

“Perhaps the most painful thing we have ever had to do is to look a
student-athlete in the eye and tell them that, no, we could no longer
support your team,” Maryland President Wallace D. Loh said at a news
conference Monday afternoon. “By being members of the Big Ten
Conference, we will be able to ensure the financial sustainability of
Maryland athletics for decades to come.”

The Big Ten includes some of the most powerful college football
programs in America. Ohio State,
Michigan, Michigan State, Nebraska and
Penn State are all members of the Big Ten, some of the biggest money
making machines in college sports.

Michigan athletic director Dave Brandon told 60 Minutes that football
accounts for 75% of the Michigan’s $133 million athletic budget. Even
more interesting, 60% to 75% of the endowments “gift giving” Michigan
receives during a 12 month calendar year take place during the four
months (September to December) when the football team plays its games.

Maryland and Rutgers bring two average football programs to the Big
Ten, but two very big potential television markets to the Big Ten.

There are more than 15 million cable ready homes in New York,
Philadelphia, Baltimore and Washington D.C. markets where Rutgers and
Maryland are located. SI.com’s Pete Thamel suggests that if the Big Ten
Network moved to basic cable in those areas (ESPN, CBS Sports Network
and NBC Sports Network are each of basic cable in those areas) at $1.25
per household, the Big Ten Network could generate an additional $200
million annually by 2017.

Thamel believes the Big Ten annual payout
will grow to between $30 million and $35 million by 2017 (when the Big
Ten will be negotiating new TV agreements) as a result of the decision
to add Rutgers and Maryland.

"It's a long fight," an unnamed television executive told Thamel, who
has no connection to the move, said of the Big Ten cashing in on
Maryland and Rutgers. "That's the potential. There's a lot of
negotiating to happen before that.

"Rutgers is the wild card here," said the executive in the SI.com
report. "Rutgers in New Jersey and New York City isn't Ohio State in
Ohio. Is it possible that the interest in Rutgers in the corridor is so
marginal that no one is willing to carry it in that corridor? Is it
possible that Rutgers doesn't resonate enough to justify 1.25 across any
of the subscribers?"

The payout when compared to the Big East for Rutgers – a night and
day difference. Currently the Big East, who do not have their own cable
television network pay their member institutions $10 million annually
(Rutgers actually received $8.4 million last year. If the Big Ten hits
Thamel’s conservative projection $30 million, the difference will be
astronomical over a ten year period.

Big Ten commissioner Jim Delany told ESPN the decision to add Rutgers
and Maryland to the Big Ten had everything to do about where the
schools are geographically, and less about what the two schools might
bring to the conference athletically.

"It's a lot about that," Big Ten commissioner Jim Delany told
ESPN.com on Tuesday from New Jersey, where he's attending the
announcement of Rutgers' admission to the league. "There's a lot of
awareness of different sports brands in different parts of the world,
but it's very hard to get beyond awareness if you're not there. Now that
we're here, we expect to work awful hard and be impactful.

"We're not going to be dominant, no one's going to be dominant. This is probably the richest corridor in the world."

Maryland was a member of the ACC for more than 60 years. Rutgers
joined the Big East football conference in 1991 and became a full member
of the Big East in 1995. Nebraska who joined the Big Ten this year was
an original member of the Big 12 when the Big 12 was formed in 1996.
Nebraska had been members of the Big Eight which added four Texas
schools in 1996, becoming the Big 12. Nebraska was one of the keys to
the formation of the Big Eight in 1928.

Tradition has little if anything to do with today’s college sports
landscape. Maryland and Nebraska both turned their backs on long
standing traditions and geographical collegiate partners for the lure of
significant financial benefits. The bottom line is just that in college
athletics today – show me the money and when you show me the money I’ll
be your best friend and new conference partner.

About Me

The evolution of Howard Bloom’s career took a dramatic change in the spring of 1997, when Howard began publishing SportsBusinessNews.com. In its fifteen years, SBN has evolved into the largest and one of the most influential sports industry publications.